Inmarsat might have been flying high in recent days amid speculation that the
satellite operator could attract a tilt from private equity, but on
Wednesday it came back to earth with a bump.

Both Morgan Stanley and Citigroup cut their stance on Inmarsat, which provides communications to ships, aircraft, the military and governments, in light of the recent share price climb and concerns over progress at its US partner, LightSquared.

Inmarsat is working with LightSquared to increase the amount of radio spectrum available and allow the US company to begin 4G services.

But analysts at Morgan Stanley said they were more bearish on LightSquared following a statement from the US Federal Communications Commission (FCC) earlier this month calling for further testing on whether LightSquared’s proposed network interferes with global positioning system – or GPS – devices.

LightSquared said on Wednesday that it had signed an agreement to develop a system for solving interference issues, but Morgan Stanley was concerned that the FCC request could push its final decision into next year.

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The broker was also turning its attention to recent takeover speculation. Over the past six weeks, Inmarsat has risen 25pc amid renewed gossip that it could be a target for private equity.

Last week, the company’s chief executive told Bloomberg that it was “natural” for private equity firms to consider an investment in Inmarsat, given its good long–term growth prospects and current stock value. But he said there had been “no formal approach”.

Although Morgan Stanley thought Inmarsat’s spectrum assets in the US and the rest of the world “could be seen as attractive for private equity”, the broker cut its rating to “underweight” from “equal-weight”.

Analysts at Citigroup also turned more cautious on the company, reducing their rating to “hold” from “buy”. They said the stock was likely to be driven by deal speculation, but given the recent strong run, they were waiting for a better entry point.

Inmarsat dropped 13.3 to 490.2p, reflecting a wider market slide as traders awaited an announcement from the Federal Reserve on whether it plans to extend stimulus measures to boost the sluggish US economy.

Miners were in the doldrums as traders lost their appetite for risk, with Antofagasta tumbling 83p to £11.14 and BHP Billiton dropping 76½p to £18.88½. Commodities trading house, Glencore International, slid 15.3 to 436.25p despite news that chief executive, Ivan Glasenberg, had bought just over 1m more shares as part of a buying strategy revealed last week

Rio Tinto retreated 148½p to £33.89 as investors fretted about a potential strike at the group’s Rossing uranium mine in Namibia.

But banks were having a better day, with Lloyds Banking Group putting on 1.93 to 36.16p and Royal Bank of Scotland gaining 0.29 to 23.38p. They were joined by defensive stocks such as National Grid, which rose 8½ to 647p and Imperial Tobacco edging up 10p to £21.03.

Investors had been anxious about the effects of a fierce cigarette price war in Spain, sparked by economic woes and a ban on smoking in public places.

But Imperial, which makes Gauloises and Lambert & Butler cigarettes, reassured the market with an in-line trading update.

Imperial said it expects sales to rise 2pc in the current year, with strong performances in areas such as Eastern Europe and Asia Pacific.

Analysts also thought the outlook for the Iberian market in 2012 has improved, as all major tobacco players there have recently increase cigarette prices.

At Investec, analysts reiterated their “buy” rating, saying they viewed Imperial’s update as “positive and reassuring relative to expectations”. They added: “The de facto end of the Spain price war is confirmed.”

But on the negative side of the index, traders failed to raise a glass to SABMiller’s decision to sweeten its offer for Foster’s.

The brewer of Peroni and Grolsch clinched its biggest ever takeover deal, agreeing to buy Foster’s after raising its offer for the Australian brewer by 20 cents to A$5.10 (326p) a share. However, SAB sank 36p to £21.85.

Pub group Enterprise Inns was also suffering a hangover, easing 1½ to 39.25p, as analysts fretted over what some described as an “extremely critical” report from Parliament’s Business Innovation and Skills Committee into the relationship between pub companies and their lessees.

Analysts at Panmure Gordon said the report believes what it describes as deep-seated problems within the pub industry can only be solved by statutory regulation.

But the broker added: “The Committee doesn’t appear to recognise the external factors (smoking ban, recession, duty increases) that have impacted the trade over the past four years nor the progress being made which has seen a material slowdown in the rate of pub closures.”

They reiterated their “buy” on Enterprise, but said it could come under short-term pressure while Peel Hunt cut its rating on the stock to “hold” from “buy”.

On the second tier, industrial materials group Cookson was lifted 20.9 to 465.3p by vague takeover speculation while beleagured Thomas Cook crept up 0.27 to 41.62p as it announced the appointment of a new chairman.

Frank Meysman, a former Sara Lee and Procter & Gamble executive, is to become chairman of the tour operator from December when current incumbent Michael Beckett retires. But the company is still searching for a new chief executive after Manny Fontenla-Novoa left in August.

Slipping back, however, was Ocado as speculation mounted that Tesco is about to launch a new price offensive. Philip Dorgan, an analyst at Panmure Gordon, warned this could hurt Ocado “disproportionately” and the online grocer slumped 13.2 to 102½p. Tesco eased 7.15 to 364p.